Civil War and the World Economy

[This Commentary originally appeared in the June 29, 1989 issue of The Mendon-Honeoye Falls-Lima Sentinel.]

Surprisingly, my immediate reaction to the Chinese student demonstration this past spring had me questioning their tactics. I feared, in their quest to move things more quickly, the young protesters would spark a hardliner response. Ironically, their daring deeds would lead to one giant panda step backward.

Change, it seems, occurs most easily if done from within. Unfortunately, neither the students of Tiananmen Square nor their leaders in Beijing recognize this fact. While I applaud the students’ objective of democracy, I suspect the only way they’ll get it now is through civil war.

And so do a lot of other people – diplomats, journalists and, in particular, businessmen. The reaction of the last group of people leads one to a rather interesting understanding in the field of evolutionary sociology. We must consider the question: “Has the world economy obviated the use of war as a viable political tool?”

More than any other time in man’s history, there is a universal hatred of war. Perhaps the strong feelings result from the realization of today’s awesome destructive forces. Maybe war lost its romantic appeal earlier this century when the human toll became too real. Possibly war no longer offers the best method to achieve its traditional objective.

Should one examine the history of mankind, one will discover the root cause of war has nearly always been the control of resources. (N.B.: The major exception being holy wars.) The hypothesis makes no comment on the nature of those resources or the reason behind the need to control them. It merely states the objective of war generally deals with the securing of tangible items. With an accumulation of assets, one accumulates economic, social and political power, as well as the means to develop technology to produce more assets.

A caveman wanted to control a riverbank because that’s where the animals he hunted came for water. Medieval kingdoms desired land to provide stone for fortresses and on which to grow crops to feed everyone. Various European nations wished to control the seas with their navies in order to protect their economic interests (namely, their colonies, which often provided cheap and abundant supplies of raw materials).

At each point above, as the controlling party amassed goods, they also managed the distribution of those goods. Doling out staples enabled the distributor to extract prestige and commitment from the receivers in exchange for some form of security. The agent who ruled over the resources therefore did so with the minimum objective of providing a standard of living for his serfs. From this simplistic view, we can see why early military leaders often became the social and political leaders as well.

When feudal governments evolved into nationalistic states, the purpose of resource allocation became not only to provide a standard of living for its citizens, but to increase that standard of living. As each nation’s economy evolved from one of bartering to one based on currency, the need to control resources diminished (ever so slightly). One no longer need land to grow one’s own food, one could use money (i.e., not any other resource dependent commodity) to buy the food. In other words, one could work as an accountant, get paid in common currency, and not need to trade, say, a pair of shoes for a bushel of corn.

Hard assets remained important, but not to the typical person. The average person only required a job which paid money. This left the purchasing decision up to the individual, which meant suppliers could market directly to the consumer and not through any bartering agency. Arguably, the industrial revolution depended on a currency based economy.

Still, with different nations in different stages of economic evolution, world conflict did not lend itself to easily identifiable win-win situations. For instance, if one nation did not recognize the legitimacy of another nation’s currency, international trade meant trading hard assets (i.e., bartering). This, in fact, is the situation the USSR finds itself in today. For years, the Soviet Union required that rubles stay within the USSR. Only actual goods could be taken out of the country. This dissuaded foreign investors, who often found they couldn’t turn around and sell inferior Soviet products in the competitive western economy. Only recently has the Soviet Union relaxed these constraining economic policies.

As the international economy blossomed, international conflict found itself addressed more and more in the trading room and less and less in the war room. The world economy has grown strong enough where it is driven not just by sovereign governments, but by international corporations and even by individuals (although the small investor has yet to have the same impact on international markets that he has on domestic markets).

Nations, even the communist ones, vie for each other’s economic dollars. All countries seek to augment the standard of living for their citizens. Physical wars have been replaced by trade and currency wars. Indeed, even trade and currency policies constantly tug at one another. For example, one might consider the high dollar (vs. other currencies) a good thing, for it means we can buy the same amount of international goods for a lower price. On the other hand, the same strong dollar, in making these foreign good less expensive, also causes our exported goods to rise in price. In the end, our trade deficit grows worse with a stronger dollar and we are forced to lower prices or consider legislation intended to protect our interests (though such laws rarely do).

What about real war, with guns and tanks and stuff? Does the world economy make war a thing of the past? Can we deep six our military budget?

Well, we can’t answer those questions here, but we can state that the world economy does not appear to rule out the use of war, in theory. In using the term “war” here, we do not refer to police actions or ad hoc terrorism. Instead, we speak of all-out armed conflict between nations or within a nation.

Let’s take China, for example. The threat of civil war – and the political instability the internal strife brings – did cause a small panic in the Asian markets. The Hong Kong index dropped dramatically the week after the troops fired on the students. American companies began to consider scaling back their Chinese investments.

The actions came about because the presumed risk associated with any China deals eclipsed the expected return. The international markets, with no malevolence whatsoever, virtually ostracized China from the world economy. Chinese leaders will have a tough battle – not only with dissidents, but with the businesses they wish to attract. Until the Chinese situation stabilizes, investors will search for other opportunities. Peace, therefore, is not just a happy idea, it is an economic necessity.

Oddly enough, we have been taught to view money as the root of all evil. True, as with any obsession, the fanatical desire for pecuniary prosperity can lead to many ill-fated adventures. Yet, currency has also become a human diversion. It’s impossible for everyone to collect tanks, planes and real estate. Fortunately, we no longer require hard assets as a measure of self-worth.

With the liquidity currency provides, today’s would-be Napoleons tend to become real-life Donald Trumps. They may have similar personal hang-ups, but they cause fewer people to march to their death and, in the end, only get one vote, just like the rest of us.

Comments

Author’s Comment: While I decided to hold back on national politics, I knew the readers needed some geopolitical grist for the mill. Luckily, I was able to fashion together an economic thesis around an issue of real-world politick. Remember, the Sentinel was published in a small town (and, as of this writing, is still published in a small town), so many of the readers knew me. They knew my background and viewed me as a credible commentator on economic (if not political) issues.

So I chose to focus on economic issues.

This particular commentary generated a lot of interest. It seemed the idea of moving from ammunition-based wars to currency-based wars made a lot of sense to people.

In a way, this article eerily predicts the situation America finds itself in today. (As you read these, you’ll likely discover my economic essays had a better prediction record than the political prose.) On one hand, we find our currency and economic system under attack from state-capitalists like China. (Indeed, in reading in between the lines. This column suggests what we now call “state-capitalism” as one possible solution to avoid a Chinese civil war). On the other hand, we see a world in the midst of a nearly decade-long religious fighting war.

Hmm, it makes you wonder. All we need is the creation of “religious-state-capitalism.” Then you’re really talking war.